Debunking the MBA Naysayers

Good education will always be appreciated, in any industry. If anything, an MBA degree brings even more advantages now than ever before, with entrepreneurship in industries such as energy, IT and sustainability demanding an even more innovative approach and hands-on skills from both leaders and employees.

Getting an MBA is now more possible than ever for an increasing number of people. Technologies have allowed for a more versatile approach to academia, with the growing popularity of online MBAs, blended MBAs, EMBAs, two-year or one-year programmes, multiple campuses, etc.

Christine Ricci handles marketing and public relations for B.E. Smith, an interim leadership recruiting firm in the U.S. for the healthcare industry. "An MBA or some advanced degree is almost a must-have right now," she said in a feature for the Business Insider. "It's expected now."

While an MBA isn't necessary for every position at Johnson & Johnson, it is an asset for many, as Frank Rodriguez, global director responsible for university recruiting at the manufacturing giant, explained to the Business Insider.

"It is something we actively recruit for," he adds. MBA graduates learn valuable leadership and collaboration skills, while also developing an understanding of how to work effectively with different cultures.

"The MBA definitely gives the student a broad business background," he said.

Cost

One would think that the increase in offering would affect that in demand, and the price. Surprisingly though, the cost of getting an MBA keeps rising, and has outgrown the rate of inflation in the United States. Undoubtedly, this is a major issue for MBA degrees, which has been continuously boosting the debate for and against the degree’s worth. Investing in an MBA often equals and surpasses investing in a home. Just approach the matter with the same gravity and seriousness as you would were you purchasing a property.

Just as well, if you are highly motivated to secure an MBA, that there are numerous options available to receive the degree at a minimised cost.

Salary

The difference in ROI, however, has been a matter of debate among HR specialists, recruiters and employers for years. The best way to judge on how big and smaller programmes compare is to look at salaries before, at and five years after matriculation. Multiple studies are available to help you reach a decision.

One reliable source is the Forbes Best Business Schools Ranking that shows the total 5-year MBA gain compared to salary before MBA and salary right after MBA, as well as years to payback, which is really useful. Unsurprisingly, all top positions are held by U.S. universities, headed by Stanford (highest 5-year gain at $99,700), Chicago Booth ($92,600) and Harvard ($79,600). These are also among the most expensive schools.

A Poets&Quants analysis of 2013 employment reports at most of the world’s top business schools shows some extraordinary figures in private equity, hedge funds and other investment management jobs where MBA grads bring relevant work experience. $375,000 was the highest post-grad starting salary of class 2013, and it belongs to a Kellogg graduate. Apart from that, the highest reported base salaries for new MBAs in 2013 were $350,000 at Wharton, $310,000 at Columbia, $260,000 at Duke University’s Fuqua School and $250,000 at Chicago Booth.

But what if you are not an Ivy League graduate? Companies such as Goldman Sachs, McKinsey and Bain tend to employ graduates from across the spectrum, while names such as Duke and Northwestern appear to have struck permanent positions in the hiring lists of the heavy-weight business consultancies of the world. Still, the CVs of successful candidates often feature less known programmes.

Caution though: averagely-ranked does not necessarily mean averagely-priced. For instance, Emory University ranked 22 in Businessweek’s MBA ranking but 4th on both McKinsey’s and Goldman’s ‘most hired’ lists, charges an intimidating $95,000 for its programme. Still, the University of Virginia, which is ranked number 10 on Businessweek, but is nowhere to be found on the list of Wall Street’s most wanted consultants, charges just as much. So it is probably a relief to know that, in this case, money really does buy you quality.

The job market

The positive forecast of 2013, suggesting that the West will continue to recover from economic distress, is indeed taking place, bringing forth a marked improvement not only in available positions but also in salary levels. Switzerland is at the helm, with the greatest increase in the number of available MBA jobs. This could partially be explained by the relocation of important hedge funds and multinational firms from the UK and Germany there in order to cut tax bills.

Australia and Denmark rank second and third for the average size of post-MBA salary, with the top ten also including the UK, France, Germany, Spain and Japan.

An important issue to consider in terms of ROI, if you are to pursue a MBA for the purpose of boosting your career in finance, is the lack of trust the financial services industry is facing today – an attitude that has been lingering since the beginning of the economic crisis back in 2008.

According to the 2014 Edelman Trust Barometer, the financial services industry continues to be the least trusted one on a global scale: 50% in 2013, and no change in 2014.

The Edelman Trust Barometer is an annual survey of trust that is carried out online in 27 countries, among 33,000 respondents.

Technology, on the other hand, is the most trusted sector, with an increase of 2% in 2014, up to 79%. It is followed by consumer electronics manufacturing where trust also increased by 2% up to 75% in 2014.

Within the financial sector itself, financial advisory/insurance services inspire the least trust among respondents, just 46%, while banks and credit cards/payments have a trust rating of 52%.

Geographically, financial services are the most favoured in APAC and BRIC, respectively 62% and 61%, and the least so in the EU with just 29%.

Generally however, trust in the financial services industry is just 1% lower than in business in general (50% versus 49%).

On a positive note for those interested in the traditional realms of MBA expertise, financial services are the best liked in the hyperactive developing markets of China, Indonesia, Malaysia, Singapore, Hong Kong and South Korea. These are the most financially optimistic countries, where regulations are not yet as tight as in the West and allow for scale of initiative and creativity in the financial sector. Developing Asia has a very volatile economy where the financial sector is seen as an island of calm and stability.

New opportunities

The 2014 trust statistics certainly show that traditions in MBA employment are shifting, but this is not necessarily a bad thing. On the contrary, more and more new industries are turning to business schools seeking innovation, leadership and out-of-the-box thinking to handle problems that come with new technologies, scaling a company and operating in new markets.

Technological companies are a major force in today’s job market, and they are also among the largest employers of MBA grads. Amazon is now fifth among the biggest employers of MBA grads. And many Ivy League schools have placed the Technology sector in their top 3 of the most employable industries for their graduates.

Universum’s list of most popular MBA employers features all of the household names that are magnets not just for MBA grads, but probably for all grads: Google, McKinsey, Amazon, Bain, Apple, but also global conglomerates such as Nike, Walt Disney, Microsoft, Johnson & Johnson, General Electric, Starbucks, BMW Group, L’Oreal, etc. Apart from being favourite brands since childhood for many of us, what also makes them really attractive to MBA graduates is their global scale, innovation, global outreach, sustainability drive and a more environmentally friendly approach. They provide an excellent ground for MBA degree holders to put their knowledge to work from day one, following the highest standards of quality in the respective industry. These employers are desirable not only in the U.S., where most of them originate, but in any other country as well.

On the other hand, they love and need MBA grads too. Talent acquisition is a critical strategy for global companies to gain advantage over the competition. Multinational companies which operate in hundreds of countries and a number of continents need the open and international thinking of MBA grads. The top programmes are exceptionally versatile. A class in a top UK programme could easily comprise 30 plus nationalities. This kind of interaction with other cultures, mentalities and client expectations, together with the well-tested capability of working with and managing teams of great cultural diversity, as well as complex business processes, are some of the great assets of MBA programmes. A good network of international contacts, leadership skills and innovation, only add to the profitable package that a MBA graduate could represent for these companies.

Universum’s view of the 2020 talent market is based on responses by more than 2,000 senior executives, CEOs, heads of HR and recruitment, employer branding and marketing. Surprisingly enough, what companies consider ‘top talent’ equates to… work experience. Education is considered more of a given these days, while the numerous opportunities to gain experience, even for non-MBA graduates, through internships and student development programmes, makes this an important requirement, even more so during the next five years. Personality and communication skills follow second and third, before grades, academic diplomas and leadership.

The most in-demand career type is ‘leader’, both for today and in the next five years. Leadership is certainly one of the aspects of MBA education and training on which programmes place the greatest emphasis. Leadership requires a host of personal qualities that should equate to successful job prospects. These are additionally fostered and tuned in practice and application: something programmes go to great lengths to secure for their students. Various theoretical courses, practical case studies, work groups, incubators and real life projects put students’ leadership skills to the text in numerous situations that require both knowledge of the day-to-day minutiae of running a company and a strategic and leadership approach to development. Being capable of leading in a multicultural and increasingly diverse environment is a skill that will be even more precious in the years to come.

Social media place another strain on new leaders and MBA grads, a challenge that is bound to remain for at least a few more years. Knowledge of social media and their impact on marketing and branding is key to modern day leaders. Today, due to social media, companies expect marketing managers to do more with less. Every step or misstep you take as a leader or a manager could become public within seconds, affecting your company’s results and brand image, but also your future prospects.

All of these challenges are actually wonderful opportunities that shape a different kind of environment for MBA graduates. Their realm is no longer limited to the relatively structured confines of the finance world. In today’s multicultural, super-global economy, soft skills seem to be gaining advantage over hard skills. Booming entrepreneurship, on the other hand, creates a vast new land of opportunity for MBAs to put their knowledge into practise for their own profit and benefit. Programmes are becoming increasingly practice-oriented and open to flexibility and the new and interesting challenges that technology brings.